Banks Tanked like hell last week and i hope you guys earned full of it as i intimated the same on 23rd Sept in my post: Banks are About to Tank! Though my downside target 19200 was achieved easily but thats not the end of downside rather its just the beginning. Nifty Bank breached a upside channel on weekly charts which was intact since february low and we have closed below the same today giving a strong confirmation to previous two Gravestone Doji. Surely looking at above charts we will get biased towards getting our shorts on cards but before than i feel we would get a short covering on daily charts. Looking at indicators on daily chart, banks are too oversold and it should get some upside before going down more. Banking policy next tuesday is expected to give rate cut and much need short covering markets but that could only sustain temporarily as i feel this cut is already discounted since long.
So may be we could see some positive moment if we get rate cut better than expected but then strategy would be Sell on News rather than buying fresh. On upside 19750 is strong resistance for short term while 19900 would be my next level to short.
Buy 19350 CE Nifty bank with tgts of 19650/19850 SL: 19100
Today was one of the most interesting expiry end of my career! It feels good when you have initiated call against 90% of the public on D-street and you get in right in just last 3 hours of trade. Had been betting on bears since mid expiry but wasnt get it right until today when i got reason to my view posted on 20th Sept in the post : “Reason would be just a confirmation!” . Just a small sign of war and we got the much awaited profit booking on cards which almost got my target 8550 mentioned in the post above and return ticket of bulls is confirmed now! But would the fall be immediate ???……. Surely, NOT!! ….. Though medium term outlook turns bearish, but a pull back cannot be ruled out in immediate sessions!! What has given me the most fear for a more downfall is Nifty has closed below 50 Day average at 8688 for the first time since early march which indicates that sentiments are turning bearish for next term and also weekly charts are expected to give a bearish close tomorrow after many months. But then why a small pull back???…….. Global sentiments could be the reason!! …OPEC decision to cut production has raised indices of Global markets and that could support our pull back for sure….. So calculating from all possible ways, we can get a pull back to 8715/8820/8870 levels in coming days. Its difficult to say one point of reversal today but 8820 seems to be more likely because its coinciding with a channel resistance too! ……So what after a pull back??……. Looking at Fibonacci i feel 8150-8250 could be level where markets could take support. Between the range we have many gaps unfilled and also we have a neckline support of “inverted H&S of Nifty” which i mentioned in my post “Time for investors to be Active!” on 14 July 2016 !
So to sum up, surely my view is bit biased on downside, but anything is possible!!
My recommended Strategy:
For risk traders:
- Go long with Double stop loss at 8550 first for targets of 8820 where you go double short with stop loss of 8980
For safe traders and Long term investors:
- Buy 8600 PE November expiry on each rise from tomorrow with stop loss at 8980 on Nifty spot….
Target on Nifty: 8150-8250
Banking Sector was on a dream run since February and out-performer amongst them were PSU Banks. State Bank of India (SBIN) which has weight age of 9.48% on Nifty Bank had always be a lender of last resorts for longs in this dream run since February but now it may not be the last resort for Bulls as its about to give a bearish reversal signal confirmation on daily charts and the pattern is one of the most successful patterns on Indian charts i.e., Head and Shoulder pattern! As marked in attached graph, we could see a that we have closed today exactly near to Neckline around 251.50 and sell-off could be triggered tomorrow below the line. Now let me explain you pattern a little bit:
Volume plays crucial role on Head shoulder patterns during falling sessions.
- First, Left shoulder downfall (marked light blue) has diminishing volumes then the rise on left shoulder. Traders thought process is such that this is just a profit booking of previous rally so we dont see major volumes during downfall.
- Secondly, Head has rising volumes on the rise but the top followed by a profit booking has highest volumes and we could notice that in the box markets Yellow in the graph.
- Third and most import part of the patter is Right shoulder and it has volume more than the recent averages specially on the breakout days. So we consider previous two sessions excluding today, we have got volumes more than last 5 days Average as marked by green line.
What should we look out tomorrow for confirmation of reversal?
- A Close below the neckline which is approximately at 251.50
- If Volume is greater than 13.1 Mln shares which is 5 day average
- a Gap down with above two points would give a better confirmation
So the pattern seems to be intact until now but nothing can be said until tomorrow’s close but smart traders should pick up the call before the close tomorrow as i mentioned above.
Now if we take some other factors in consideration then 250 PE is also strong support indicated by Options for this expiry which is coinciding with Neckline level. This would surely trigger strong long unwinding below 250 mark tomorrow,. Secondly, even if u look at Nifty bank stocks, SBI is the only stock of top 5 weight-age which hasnt triggered sell-off yet in last 3 sessions. So after, Yes Bank, Indusind Bank, Axis bank, ICICIBANk, can it be SBI? …We would get the answer tomorrow..
Sell SBI tomorrow below 251.50 with stop loss of 261 and target of 227 on positional basis…Safe traders can wait a day close confirmation….Cheers!!
Markets had been quite volatile this week on various statement awaiting from BoJ and FED but still Index charts are looking weak as i explained in my last post on Nifty. Though we have seen strong stock specific buying in Mid-cap sector and some front-line stocks too but the main pillar of Indian markets, Nifty bank (Bank Stocks), have started showing signs of under-performance in coming weeks. We saw trigger first from Yes Bank, followed by Indus ind bank to some extent and the main culprit born this week was Axis Bank. Looking onto PSU Banks , if you look at SBI counter, it has been resisting strong at 260 CE were we are witnessing strong writing. So overall Stock specific banking stocks are looking weak. Even if you look at Nifty bank options, we have been witnessing strong writing at 20000CE but on the downside writing for this expiry is still at 19500 PE which gives me strong feeling we could get that next week with furious fall. Coming to chart below, its weekly chart of nifty bank.
If we look at the channel which was intact since the low on Budget day, we are closing near to downside support line of channel for almost 6th time but this time is fearful! Why? …We have got 3 bearish candles for last 3 week…Inverted hammer …Gravestone Doji…..Gravestone Doji….!! So if we trade below 19760 spot level next week, it could be Trend Reversal for medium term…indicators are already turning bearish….So i would be recommending sell on rise on Nifty bank…with stop loss at 20300 …Target …19200!!!
Volatility has been peaking since last few sessions, not just in India, but around the world. This brings some fear among traders. If we talk about some crucial factors signing a massive move ahead are: 1) Cash Portion avg in US Mutual fund is at 5.5% which is near to the same level it was in 2008 just before crisis. 2) VIX position in US is at record high levels. 3) Foreigners Open Interest in Indian Derivatives is at record high levels of life time. These are the few points which gives me strong intuition of a massive move on either side ahead!……..Which side? …….I would say preferably Sell Side! In my last post i did mention to go Sell on rise on Nifty and we got ample opportunity to go short at higher levels than the day i posted. Let me point out to you a downside channel which is just confirmed today making support for near term around 8550 while for resistance side 8800 is upside channel resistance as well option resistance built up today. So may be for this 8800 could act as resistance and 8550 as downside target. All saw Nifty PCR at 1.10 ! But why arent we getting that downside move quick?….Because we need a reason to confirm downside… This reason could come in from FED, BoJ or War…It wouldnt matter what the reason will be but its going to get a tag for next fall….So strategy remains sell on rise with first target at 8550 and SL at 8980.
Finally it seems, Nifty has given a sell sign on Weekly charts after many months. In my last post “Behind Enemy Lines” , i mentioned to go short below 8720 level and we have seen for two sessions that we traded below the same level giving her intentions of further move. Though it doesnt mean we are going to witness strict sell-off from this point of time but we may see some short covering before sliding ahead. Some factors which are supporting my bearish view are block trade selling in banking stocks which are high beta to Nifty Movement, Weakening Global charts and Shifting Option Data Range. Today many of the banking stocks including PSU banks so more volumes than the last 5 days average volume so may be some fund action or profit booking by HNI portfolio holders. Secondly, Global markets are weakening on charts suggesting bearish sentiments over the inflow. Thirdly, option data which was suggesting 8750 as the base until Monday sell-off, has shifted to 8600 by today and on the upper side 9000 resistance has shifted lower to 8800
Now coming to Technicals, though Daily charts may signal a short covering but weekly charts are reflecting a Upcoming Evening star pattern on D-street which could be confirmed with Fridays close. But until now it has satisfied 3 out of 4 rules of the Evening star pattern: 1. First candle should be a long green candle, 2. Second candle should be a Doji , which in our case is Grave stone Doji, with a gap over first candle. 3. Third candle should open with a Gap down . But only condition remaining to confirm is ” third candle should close atleast at distance equal to half the body of first candle” So looking at other factors above, i feel last condition may be fulfilled by Friday’s close. Which means if we close around 8668 we would confirm the pattern. So the strategy remains intact ” Sell on rise with stop loss of 8980, while targets are 8550/8300″
Nifty has been in a strong up-move with liquidity around the world flowing inside the markets which has been just supported by improving fundamentals. To say , last rally can be accredited to liquidity while still a long term fundamental move is yet undone. Since February we had seen a complete game in hands of Bulls but somewhere bears are getting charged up for a furious war around the corner. But last weeks sell off got some fear waiting for bulls “BEHIND ENEMY LINES”. Technically charts haven’s given yet any strong bearish pattern on Daily charts, but there are few small Enemies waiting for Bulls at the Lines:
Enemy Line 1: 8820, a gap unfilled since the last weeks opening which could act as some support for intraday Low
Enemy Line 2: 8800, which has been lined by Option writers as a support for longs on closing basis which should be watched out
Enemy Line 3: 8750, which is indicated as the last support to bulls and should be considered as a stop loss to all longs initiated for a short term trade
Enemy Line 4: 8720, which was the breakout level from the consolidation pattern of last 2 months could acts the trigger point for Fresh Shorts.
So, Behind these Enemy lines, Bulls are going to be beaten up like hell and bears could take over them easily.
“Strategy”: Keep stop loss to all current longs at 8750 and short Fresh if Nifty closes below 8720 for a day!
Though expect markets to be volatile and you should hedge your self with appropriate options! Have a wonderful week ahead.
Nifty banks has given tremendous run in recent time and has out-performed Nifty in last two expiry. Stock specific movement in banks had led this divergence. To take some names, PSU Banks gave a strong short covering on weekly charts after two years of under-performance until Budget day this February. Still many PSU Banks are showing signs of a good move next week but Nifty Bank index is approaching channel resistance near to 20100 spot level. So may be those who had longed this expiry could profits around 20050 while start fresh shorts above 20100. Options data is suggesting strong resistance as of now around 20100 levels.
Strategy for Next week: Book Longs near 20050 and Sell on rise above 20100 with Stop loss of 20250 for rest of expiry